Thursday, April 9, 2009

An Avoidable Disaster

The financial meltdown was caused by millions of bad decisions made by millions of people who thought they were riding a wave of endless wealth creation. The temptation of easy, risk-free profits led to contagious, reckless greed.

It started with the government, which tried to promote home ownership by lowering lending standards and pressuring lenders to write mortgages to people who wouldn’t normally qualify for them. The push for lower standards was greased by contributions and favorable mortgage terms from lenders Fannie Mae and Countrywide Financial to key politicians. This was stunningly successful: our elected officials got money and great deals while the lending executives personally pocketed millions from the easy money they made handling subprime loans.

Given their marching orders, the financial industry leaped in and sold mortgages to people who were bad risks. And they loaned them up to 105% of the property value with no money down. The loans were often made affordable by charging low rates up front that would reset to higher rates in the future. The bet was that the value of the property would increase enough to enable refinancing before the reset.

The borrowers were thrilled. Many bought houses without spending a dime of their own money. And they expected the property values to rise and give them windfall profits with no risk on their part.

Most banks and mortgage companies didn’t keep the mortgages on their books: they were sold to security packagers. The lenders were happy: they made easy money writing the loans and avoided risk by passing it on to others.

The investment bankers, who created the securities and sold them to large investors, were happy because they earned large fees for doing the paperwork. They passed the risk on to investors.

The investors were happy, too: the investments were attractive because of the high rates charged to borrowers and, even better, they were “safe” because they were collateralized by real estate.

What a ride! Everybody was happy, from the borrowers to the investors. Until the autumn of 2008, when the gravy train derailed. That’s when AIG, the largest insurance company in the U.S., went broke. You see, AIG insured the big security investors against default. When mortgage rates reset to unaffordable levels, borrowers stopped making payments. Housing prices dropped and properties turned “upside down:” more was owed than the property was worth. Massive defaults occurred, AIG was on the hook for money it didn’t have, and it became insolvent.

Prudent observers warned about the dangers years before the fall, but everybody was having too good a time to break up the party. When it ended American taxpayers, most of whom weren’t even at the party, were left with the hangover.

Man’s tendency is to be selfish, greedy, and sometimes self-delusional. The Bible tells us this. It’s the root reason the government, banks, mortgage companies, investors, insurance companies and borrowers got caught up in the hubris and diligently worked together to ruin a perfectly good economy.

Those who acted with biblical wisdom dodged the catastrophe that visited others. While 401k’s may now be “201k’s” those who didn’t succumb to the temptation of easy money have avoided the stress, foreclosure, bankruptcy and humiliation that’s affecting others.

This isn’t a cheap “I told you so.” But it’s clear that man’s weaknesses can be countered by biblical teaching. The lessons aren’t impractical, ethereal or unrealistic and they make as much sense today as when they were first written. Man is advised to handle money prudently, guard against greed, use sound judgment and discernment, and avoid fraud.

We’ve got a modern world the ancients wouldn’t recognize, but our psyche and their sensibility are the same today as they ever were. But people shrug off timeless truths and fiascos like this are the result.

Finding Faith in a Skeptical World

Chet Galaska was an atheist who became a Christian in his early fifties. It took several years of learning about the faith for him to shed his skepticism and become a believer.

Finding Faith in a Skeptical World covers subjects that once stood between him and faith. As he searched, he found that his skepticism was based on shallow perceptions he’d accepted at face value. One by one, troublesome issues were explained and they became reasons for belief instead of doubt.

It was as though he had a scale, with reasons for skepticism on one side and reasons for belief on the other. When he started, there was far more weight on the “skeptical” side, but it gradually shifted and became counterweight on the “belief” side. Eventually, the evidence for faith far outweighed the arguments for disbelief, and the case for faith became overwhelming.

Some chapters deal with matters of faith such as prayer, redemption, salvation and sin. Others address issues like Christian hypocrisy, why bad things happen, miracles, Satan and the Christian view of war. Some are about the seemingly contradictory relationship between science and religion that are discussed in chapters on scientific perception, creation and evolution. Other subjects like the sometimes violent and cruel history of Christianity, “Born Agains” and the Christian view of the Jewish people don’t fit neatly into any category. The common denominator is that each addresses an issue that can be misunderstood and create a distorted, negative view of the faith.

The book was written with the intent of providing brief shortcuts for curious unbelievers, those seeking faith, those new to it, and for Christians who may not be familiar with some of the ideas covered. The author realized that a book like this would have been valuable in helping him come to faith. Since none was available, he wrote Finding Faith in a Skeptical World to share the things he learned in a reader-friendly, direct and concise way

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1 comment:

HakimGod said...

Everyone has a story to tell. It's not about God or the Devil, it's about people. My story begins with my Schedule.